Post-winding-up property transfers need bona fide benefit and likely court approval; unsupported sales were not validated.

Post-commencement dispositions of company property are not automatically void, but Section 536(2) of the Companies Act, 1956 permits validation only in exceptional cases where the transaction is bona fide, beneficial to the company, and one the court would likely have approved if prior permission had been sought. After a winding-up order, the company's property is under the court's custody and unauthorised transfers by the board or without leave of court fall within the mischief of the winding-up provisions. On the facts, the impugned sale transactions lacked valuation support, transparency, and demonstrable benefit, so validation was declined.

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Issues: (i) Whether dispositions of company property executed after commencement of winding up could be validated under Section 536(2) of the Companies Act, 1956. (ii) Whether the disputed sale transactions were bona fide and in the interest of the company so as to justify validation, despite being executed after the winding-up order and without leave of court.

Issue (i): Whether dispositions of company property executed after commencement of winding up could be validated under Section 536(2) of the Companies Act, 1956.

Analysis: Section 536(2) renders post-commencement dispositions void unless the court otherwise orders. The commencement of winding up relates back under Section 441(2) of the Companies Act, 1956, but once a winding-up order is passed, the company's property is deemed to be in the custody of the court and the Official Liquidator is required to take charge of it. After the winding-up order, the board stands superseded and any transfer of company assets without authority or leave of court falls within the mischief of Sections 536(2) and 537(2). Validation is not barred in every case merely because the transaction occurred after commencement, but a post-order transaction requires a strong factual justification and legal basis for court approval.

Conclusion: Such dispositions are not automatically void ab initio, but post-winding-up-order transfers without leave of court can be validated only in exceptional circumstances.

Issue (ii): Whether the disputed sale transactions were bona fide and in the interest of the company so as to justify validation, despite being executed after the winding-up order and without leave of court.

Analysis: The transactions involved a large extent of immovable property, were not in the ordinary course of business, and were unsupported by any valuation report. The sale agreement and subsequent endorsements raised serious doubts as to the genuineness and transparency of the dealings. The transactions were executed by a purported attorney rather than by an authorised director, and several acts occurred after the winding-up order and after restrictions had been imposed by the BIFR. The sale proceeds did not materially discharge the company's liabilities or demonstrate a clear benefit to the company in liquidation. Applying the test whether the court would have approved the transaction if permission had been sought earlier, validation was not justified.

Conclusion: The transactions were not proved to be bona fide or in the interest of the company, and validation was refused.

Final Conclusion: The request to validate the impugned dispositions failed, and the company-liquidation side succeeded in securing cancellation of the challenged sale deeds.

Ratio Decidendi: A post-commencement disposition of company property may be validated under Section 536(2) of the Companies Act, 1956 only when it is bona fide, beneficial to the company, and one the court would likely have approved if prior permission had been sought; where the transaction lacks commercial justification, authority, and demonstrable benefit, validation must be declined.

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